Aguas Andinas S.A. (AGUASA) Earnings Call Transcript & Summary

[Foreign Language] And today, we are with Aguas Andinas to introduce the financial results of 12 months of the year of the [indiscernible] [Operator Instructions]

[indiscernible] Analyst at Banco Santander. And today, we are with Aguas Andinas to present the company's 12-month 2023 results. [Operator Instructions]

[Foreign Language] I'm going to introduce the panelists. We have the Director of Aguas Andinas Miquel Sans who has a degree in the administration of the university from [indiscernible] and has a diploma in Business Sciences of the University [indiscernible] and the vast graduate of the audit of [indiscernible] Master. And he had some development in the wastewater master where he was a general manager of the audit for [indiscernible] in Barcelona and Madrid for the year 2021 year in which he assumed as a Financial Director for Aguas Andinas. And then in year 2023, he reached Aguas Andinas. And then we have with us Edson Landeros Poblete planner of Aguas Andinas with more than 20 years C&G health system and [indiscernible] Resources international and national. He has been performing functions of infrastructure, planning of the development of technology and strategic consultancy as well. Also, we have to underline the participation of [indiscernible] of technology with the University of [indiscernible] University and [indiscernible] and has had a development in the directors will be participation as a Director of the [indiscernible] But in Chile and the point of [indiscernible] and channels in review of Aguas Andinas introducing and underlining the [indiscernible] of the residence of [indiscernible] and the group of [indiscernible] Having introduced our panelists today, I'm going to hand the floor to the company, so he -- and they may introduce the company [indiscernible]. And let us start, first of all, putting us in context. As you see here on that regard this year has been a [indiscernible] been standardized with the last purposes -- what has happened in the last years. So this has allowed to fill the El Yeso, this dam is now filled and this hasn't happened in many years. Also, we have different temperatures in the new term depending on previous year, and the impact is a part of the next launch to come. And concerning the arrival, I wanted to introduce a couple of aspects and Level 4 in levels of efficiency and the corresponding growth concerning what we have accumulated for [indiscernible] we have good work in the areas contributing to the success. And in the bargains, we have the rate of 1.9%. We believe that we were going to have some levels over the 4% and in the last years, we have been introducing these rates with the current part downloading as well and having a decrease arriving to the 9% that we have at the end of the year. And as we know, at the end of the year, the fourth tax process with the basis. As we explained before, this is a long process that is going to finalize in January of 2025, and we are still in the middle of that basis. And now we're going to reduce the account of results with an increase of the [indiscernible] rate for all being 2022 and the customization of all these events and also the indexation that we have had in February 2022, of [indiscernible]. This report complies with a positive effect of our consumption in the [indiscernible] consumption and over consumption during the last year was majorly coming from the different decreases in the down areas. And altogether, the year had a positive balance of 0.3%. And to the low temperatures, we have to add something concerning the winter in the last years, as we said in the last months of the year we are having in the month of November a maximum temperature of 4 degrees, concerning previous years, and that trend is going to be [indiscernible] up to be instead of June. In the part of costs in the improvement that is explained in our debt and inefficiencies. We have introduced lower transfer of water in the resources of the year, and this allows us to generate a dam of -- DSO at 100%. Also we have other events in January. We haven't had any significative differences that have impacted in a big manner in the account of results. In the increase of cost by EPC and operative ones, we have had an increase in the first term with some pressure concerning the reduction of the dollar and in line with the evolution of the inflation with our complementary services in the situation of [indiscernible] are the one that we have had in the first part. And then the financial results, we would like to underline the U.S. that has allowed a relevant improvement of financial results that is going to be depending on the IPC in a superior manner, now what has been said before. It will go now [ GG ] generation. Here, I would like to underline the deterioration of the cash in the last year. This has allowed us to maintain the investment on line with the objectives. And on all the things we have the level of payment of taxes that is well superior to the one stated, and this is going to be something positive at the end of the year. On a level of that, what do we have? I would say that this year has been a year of transition. We are going to start with a level of treasury that is very high and is very superior to the [indiscernible] with CLP 179 million. This has allowed to give some [indiscernible] results to finance something important to take into account that we're going to do this year, but starting with the cash position that is comfortable with $109,000. So we will have this much if we had not a level of currency. And in the investment part. What do we have? We have closed the year 2023 complying with the plan that is stated in matters of investment with the focus in efficiencies to ensure the operational continuity. And also at the same time, we have been developing some projects that allow another level of profitability and a rate some figures that are going to finalize at the very end. Everything being compliant with the demand of the superintendency at the end with the delivery of network's efficiency, where we have seen some collectors that are essential for the plants that will allow to have something more active and more specific. In that plan of investment, that is ambitious and has been developed maintaining a balance from a financial point of view and decreasing the EBITDA over 3.7x, improving at the same time. at the level of pre-pandemic reaching out practically [indiscernible] 22 per action at the end of this year 2023. And these improvements, financial improvements have been hand in hand with positive advances, similar as of STG with different conditions that have been recommenced. I'm not going to mention them all. Here, we have a summary but I wanted to underline the Board of Directors of Chile and in first place in the level of the relationship that we have with the investors, we are very proud of that result. Also, we have other recognitions and improvements that we have seen here with the [indiscernible] that we observed in this slide. And without further delay, now we're going to have the floor to Edson.

[Foreign Language] Yes, I have the microphone now. I'm going to hand the floor now. Start talking about vision of the ideology in the year 2024 [indiscernible] in the year 2025. First of all, to understand that we [indiscernible] work, how is the supply working in terms of Santiago, our main sources, superficial sources, they are in the middle of 80% of the supply in Santiago, and they come from the Maipo River from discounts on the basin of Rio Mapocho. And these are the two main supporters [indiscernible] of Santiago. And then the other thing that is in the Maipo River, Yeso, allows the filing of that area. And the hydrology as well, this will yield a margin with a strong component, the accumulation of the snow. And the hydrologic year is quite different. And by now, we are leaving the end of what could we [indiscernible] year 2023, 2024. 2023 we have the phenomenon of the river that was there in the second half of the year and introduce and we're going to see the hydrological registered that is moderate and is superior to the records that we had during the last years with the mega drought. In terms of rainfall, we can see how has this happened in Santiago and in the Yeso dam and in the rainfall that was less than the average going now after June to a condition of the [indiscernible] most of all the season. And then we're going to see how we have reshaped river flows of this year. And this was an average of the line that you see here on the upper left graph, we see -- we see how this has behaved near the average starting with a condition that is different in the first half of the hydrological year. And we -- this was way superior to 2021, 2022 and the hydrological year. On the other side, El Yeso what do we have here. Started with the situation that is drier than the average were finalized with volumes though are well over the ones that we have. This is related to the flow in the valley of Santiago [indiscernible] and this gives an average of the -- all the levels that we had in the [indiscernible] Santiago, and this is a hydrological similar year actual. And the next one, please, here, we have a level of the first part of the year. We have [indiscernible] And now we have the trend that we have been following in a period of drought. And in June, we see the first is all the great rainfall that we had at mid of June. This is a rainfall that it was very specific in the level of any not much accumulation of snow only at very high levels. And at the end, the very -- and we had volumes that were overall were considered at the beginning. Then we have a condition until December considering the asking compared that to normal levels. And we commented at the same time that these months will have low temperatures, although whether expected in the Maipo River with another level of flow. This was reflected in the month of January and December with the volume of flow with an extra average to the average that we have. The comparison to the drought in the year '19 and '22 is big. We have a lot of flow depending on what we had before. And the next one, please. This allows these grade models allow the filling of the dam at the beginning of January. Here, we can see the infrastructure [indiscernible] of this patch of the river that works when the dam is fully filled. Here, we can see the waste disposal as it takes place the labor of waste disposal. We will have a limit in how the dam is filled and how do we see that. This is an expected situation in the year 2017. So this allows us to have during March, a good level in the year 2025, a good full capacity dam. Next one, please. what happens at the level of the consideration and what is going to happen during the next months to go. We have a diagnosis with the different climate models that are giving a transition towards a neutral condition on the -- and towards a condition released during the second term of this year. In this, obviously, this condition is associated on a general basis to a situation that is drier to the El Niño condition. Nevertheless, what we can see here is that the progression of the models is large. And in general, we have a certain level of that area. This is updated every month at these rates at the same time when the El Niño starts and when do we have that neutral area, there is a lot. We observed in the years after the 2009, we have had 2 years are similar, and we have a similar condition. And we have an El Niño condition that are for 2016 as well. We have these 2 years basins start of the area of light blue part. And we have an observation we have different flows and maybe it is depending also on the mega drought that we have had during the last year to come. And on the other side, [indiscernible] condition is part of this period and part of the start of this period and is depending on first dam that is full at the very beginning. This depends, of course, on the different conditions that we're going to have in the next months to come. If we look at the level of probability, these 3 years and 25%, and there is less being the [indiscernible]. And finally, what happened [indiscernible] project -- what about the productions of the de-icing. Summer is in the highest level of consumption. This is at the end of August when we have closed year rainfall that is between June and August, and we are going to get you the projections for the next months to come on the next week is until March 2025. Thank you very much.

[Operator Instructions] First of all, the levels of the dam, that is the first question. And the phenomenon that is coming, concerning in the next months to come. This is the change of the things that we have to observe. What about the measures of the short term? What are the things going to happen? And the phenomenon of El Niño that we have another level of drought concerning the investments that have been planned. These are something constant and maybe you can give us a bit more off of a color, more of a detail.

We have started from this hydrological year. We have a full dam and this is the projected to control at the end of March. Then the idea of the dam, of course, is to use in different conditions of Maipo and we are monitoring the hydrological situation in the river. And we have the agreements valid to see the hydrological conditions there [indiscernible] and they can guarantee the supply and to maintain as well record levels of the dam, okay?

Thank you. And also aligned, we the dam or the different phenomenon, one of the costs that we have and the level of medication on the things that we are going to see, what about the pump of the electricity. It is like a matter of pumping, right, with the first result area. This is an area of the climate change, especially for this type of costs. This should be more relevant.

Here in the last years to come, we have had the trend. A trend from the 15% that we have on historic point of view in well water, and the truth is that the trend to optimize the water of deposits as a drought and as what we have on a permanent basis decreases as we have it with the rivers. We've measured that with the rivers. But as short term, it has been said, as [indiscernible] said, these metrological situation in winter in spite of the determination of how this mix is going to be between underground at the end of the year. And also beyond that, we have a trend the use of underground waters, and I will take the chance to say again, depending on the level of efficiency that we have, we have the efficiency to use this at a higher level with the sanitary task of extraction that are the other way around.

Thank you so much, Miquel. We have a question from the chat. I believe that it can be written down with the one. What are the relevant changes that observed and how can we do this all this on this [indiscernible] rate.

One of the things that we have on this process, it's an incorporation in rate with the ones that are necessary to give some contribution and to give more safety and resilience to the system. I would qualify this as the most important relevant thing. And the rest is a process that is quite necessary and it's a standard and without changing.

Thank you. And related to the timing here. Where are we going to expect over here will these degree basis?

I'm going to go over these rates. This has been published. We have probably a preliminary basis 20 November. On this basis, the preliminary basis, they were observed on the 26th of January. And at the same time, the superintendency responded this week on the 13th of March. The answers to our observations and also in a posture where there's an instance of something like brief concerning the rates. As a second reconsideration of the answers on the superintendency. And then the relevant cost that is the first of October is a change of rates that goes head-to-head with the [indiscernible] rates. And then we have a month in which the company will prepare discrepancies to the superintendency based on the study to evaluate that. And then the first fixed part, we have a period of direct negotiation in which we have an agreement. And if we reach that decree right away, we can have another level of rate for the company that will be dealing from the first of March of the year to 2025. Then if we don't have any agreement during the first 15 days of November, the company has the option to call the committee of experts, committee that should be solved in the delay of 1 month, 1 month and a half. And then in January next year, we have to know which is the result of the process.

Thanks very much, Ivan. What about some expectations on some costs? Yes. What about the costs?

What about it? What can we do for the rate at the level of the cost? What about the cost -- I mean, we haven't -- what about the lines? We have increased this more on the APC an increase with collectible with other type of a [indiscernible] so what we're doing here, what we are observing is another level of expenses that is quite an -- specific to today, so we have to be careful.

Now we have a lot of questions from the chat. And the issues concerning the investments for the year 2024. Can you give us some more detail either your full client, please?

For this year 2024, we consider a level of investment that is par with 2023, we see it in the figures. So we are decreasing some percentage, but it's a going to be ready to do what we have.

And on line with an investment -- we have another question where we say, which is the current idea of what is going on with the collection of the dams and the production plants and then we use water. And what about this? Do we have any plan to development?

Concerning the first project to come and the first alternative of the condition that we have for the instruction [indiscernible] this is in the middle of a process. So this depends on how much do we want to deal with the environment and this is subjected to that. And the aspect of will be [indiscernible] one step forward, and we are in the operations of the environment and associated also to the project. So we aren't -- we are not getting with this part of environment and the timing that we have. We are managing having this procedure and the end is conditioned on entrants and the return is subjected to the rate at the end.

Thank you very much. Certainly, we have another question. There is directed to Ivan. And the question is, are you going to propose some [indiscernible] of the model or the regulatory that is for the water and is collectible as well? When can we know this and the proposals are going to have any value?

Well, we're going to know when the exchange happens, the exchange on the rates how much is going to incorporate in each part. Of course, we're going to incorporate everything that we can, everything that we're looking for are the product on the 5 years. I don't know what else can I add to that information per basis. This is going to continue, of course, and this is [indiscernible], and we don't have any relevant restrictions to incorporate what's going on or the reality that we have experienced in the last time.

And online with the regulatory subject, Ivan, you've done, how do you seen any -- do you have any perception we have discussed any alteration of any regulation of the sector?

Not for this process. This is why we mandate this [indiscernible]. There's no changes. So that belongs with or what's going on.

Okay. Here, what do we have? We have some housing like the policies and what's going on with the utilities with 100% of the payout. Here, we have the dividends what's going on and the distribution is going to be generated with the tax holder on the 24 of April, where we have especially the 2023, and historically speaking, could you remember that we have some societies that are recurring for this exercise and [indiscernible] on the assets and the probability of what happened after the pandemic, of course, and the affection all the markets that we have as well as that, as I said, the policy and the test and the dividend in multiple the test is something that will depend on the moment that is in [indiscernible]

Thank you so much, Miquel. We have another question on the chat that indicates in the short term, do we have any management of assets for the debt financing? Do you expect to do that?

As I said in my intervention in the 2023, we have a year of transition where we have had a [indiscernible] on what was going on concerning what we have so far, we've been able to give an amortization to the market and the year 2024 is considered that we have to refinance that. And we are working in that. And of course, we have a review of depending on the level of opportunities at any time.

Thank you so much again. Okay. Now for the sake of time, I'm going to put an end to this call. And before I end, I'm going to hand the floor to the company perhaps for final questions.

This is part -- thanks very much. This is part of the presentation. Thanks very much for the presentation results of the company, and we will be seeing in a couple of months [indiscernible] review the first term for the year 2024. Thank you so much Edson and Miquel, and have a good day and also a good weekend. [Statements in English on this transcript were spoken by an interpreter present on the live call.]